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Debunking the Free TV Spectrum Myth

WASHINGTON—The broadcast lobby had finally deconstructed the long-held
notion that its constituency has obtained spectrum entirely for fee while other
communications giants have paid for theirs. Not so fast, says Jeffrey A.
Eisenach, managing director and principal at Navigant Economics. Eisenach was
hired by the National Association of Broadcasters to shed some light on an
assertion that’s persisted—unchallenged—for at least 15 years.

“As an initial matter, this argument overlooks the fact that broadcast
television licensees are not unique in the sense that they hold licenses
originally granted without direct payment to the government,” he said. “Prior
to the congressional grant of auction authority to the FCC, all spectrum
licenses were issued for nominal payments of application fees. Today’s largest
wireless carriers, for example, received their initial licenses for free, as
did direct broadcast satellite providers.”

Eisenach further states that 92 percent of all U.S. full-power TV broadcasters
have paid for their licenses—an aggregate $50 billion.

“Current television broadcasters, in short, did not receive their spectrum “for
free,” and there is no sense in which they would receive a windfall by being
accorded strong property-like interests in their licenses,” he said.

Eisenach said the Spectrum Act, which gave regulators the authority to hold the
upcoming incentive auction, affirms certain de
facto property rights for TV licensees in that it requires displaced
broadcasters to be compensated. While legal authorities and policy makers don’t
oppose the recompense, the dispute over perceived property rights remains. This
is due in part to the continued assertion by individuals in the public arena
that all broadcast TV spectrum was obtained for free, and who have a vested
interest in seeing that spectrum reassigned to wireless providers. Preston
Padden, former president of ABC, reacted to such a message from Consumer Electronics
Association CEO Gary Shapiro.

“In fact, 90 percent of today’s full-power TV broadcasters bought their spectrum
in a secondary marketplace that was supervised by the FCC… Verizon, AT&T, Dish
and DirecTV—all of whom did get free spectrum; in the case of Verizon and
AT&T it was predecessor companies such as Nynex, Bell Atlantic and
Southwestern Bell—[and] all are CEA members.”

Of 1,344 full-power commercial broadcasters, 1,230 bought their licenses for an
average of more than $40 million.

Eisenach estimates that around 11 percent of all mobile wireless spectrum now in
the market was awarded for free in 1983, yet this spectrum remains subject to
liberal, secondary market requirements. Broadcasters, meanwhile, must adhere to
the rules that governed the original spectrum grant. Eisenach argues that
freeing broadcasters from grant-based regulations and giving them secondary-market
type property rights would encourage investment and inventiveness, as well as
naturalize the market for spectrum

“There is no sensible equity argument against according television broadcasters
strong property interests,” he concludes.